Monday, April 1, 2013

Get a Leg Up on Leggett & Platt

A strategy idea for options trading investors.

OVERVIEW: Leggett & Platt (NYSE: LEG)

LEG is an international diversified manufacturer of products found in homes, offices, retail stores and automobiles. Divisions include Residential Furnishings, Commercial Fixturing, and Industrial Materials.

LEG�s first quarter earnings came in at 30 cents, topping analyst projections of 20 cents, and its revenues were $896 million, up from $816 million a year ago. LEG said it would buy back 10 million shares by year end. The second quarter report is scheduled for July 28.

LEG traded near $27 after its first quarter release but has since fallen back to trade in a range around $23 per share. It has found support at the $22.50 level.

OPTIONS TRADE:

Buy to open the LEG Sep 25 Calls for 70 cents or less, and sell to open the LEG Sep 22.50 Puts for 75 cents or more, for a net credit of 5 cents or more.

The put sale pays for the purchase of the call. The danger here is if LEG falls below the 22.5 strike the stock may be put to the investor at that price.

If the stock continues back to the $27 level by September, then the call would be worth $2, a nice rise on a trade that was entered for a small credit.

Find more option analysis and trading ideas at Options Trading Strategies.

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